Why Coke needs Green Mountain

Earlier this month Coca-Cola Co. gave a huge boost (60% at one point) to Green Mountain Coffee Roasters’ share price when it took a 10% stake in the company. Looking at Coke’s latest results, investors are hoping Green Mountain can return the favor.

Included in the drop in revenue are various structural changes and exchange rates that went the wrong way. But that’s not what the market focused on, and it’s not what Coke’s top executives are worried about either.

In his third-quarter report to shareholders, Chairman and CEO Muhtar Kent called the company “constructively discontent” with its results. This time he wrote about the need for the company to restore momentum while admitting global volume growth was “below our expectations and long-term growth target.” Last quarter, volume growth in China and India slowed, it was flat in Latin America and it fell 1% in North America.

Coke is desperately seeking ways to reverse this trend. And that’s where Green Mountain comes in.

Unlike PepsiCo Inc.
/quotes/zigman/238082/delayed/quotes/nls/pepPEP, which has built up a huge presence in the snack business, Coke so far has remained a beverages-only operation. Its 10-year strategic partnership and 10% ownership in Green Mountain announced earlier this month continues in this vein. At the same time, the deal gives Coke access to the fastest-growing soda market in North America: the kitchen counter, where Green Mountain’s Keurig Cold at-home beverage system is making its mark.

Clearly, Green Mountain is on to something. Its sales hit $4.36 billion last year, up 13%. That’s exactly the kind of growth Coke needs to tap into, even if it only gets a 10% slice of it.

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